Bond markets improved overnight very slightly and then more aggressively after Beppe Grillo said he would not be supporting the formation of a government with Bersani. That news hit just before the weaker-than-expected Durable Goods report and certainly trumped it. Even so, equities markets continued to rally after opening stronger at 9:30am. Stock market strength has largely been a nagging factor draggin Treasuries higher and MBS prices lower. Both are still in the green so far today, but have backed down closer to unchanged levels as Bernanke fields questions from the House Financial Services Committee.
MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing
is available via MBS Live.
Pricing as of 11:08 AM EST
Morning Reprice Alerts and Updates
Below is a recap of instant Reprice Alerts
and updates issued via email and text alert to MBS Live subscribers
Slight Increase In Reprice Risk For Early Lenders
Only for those lenders out with rate sheets earlier in the morning, reprice risk is possibly already increasing as Fannie 3.0 MBS have fallen from 103-22 around the first rate sheet print times to 103-17 currently. The lenders who price that early don't always reprice negatively on a 5 tick drop this early, but it is on the edge of "possible."
We probably wouldn't put out the alert if the swings looked purely incidental, but Euros are threatening a break of their overnight highs and the stock lever is in effect.
10's are 1.8688 and equities are at their highest levels since 3pm Monday.
ECON: Pending Home Sales Stronger Than Expected
- PHS Index +4.5 vs +1.5 Consensus
- Index +9.5 vs Jan 2012
- Index highest since April 2010
Pending home sales rose in January, and have been above year-ago levels for the past 21 months, according to the National Association of Realtors®. There were healthy monthly gains in all regions but the West, which is constrained by limited inventory but was slightly improved.
The Pending Home Sales Index,* a forward-looking indicator based on contract signings, increased 4.5 percent to 105.9 in January from a downwardly revised 101.3 in December and is 9.5 percent above January 2012 when it was 96.7. The data reflect contracts but not closings.
The January index is the highest reading since April 2010 when it hit 110.9, just before the deadline for the home buyer tax credit. Aside from spikes induced by the tax credits, the last time there was a higher reading was in February 2007 when it reached 107.9.
Lawrence Yun , NAR chief economist, said inventory is the key to this year's housing market. "Favorable affordability conditions and job growth have unleashed a pent-up demand. Most areas are drawing down housing inventory, which has shifted the supply/demand balance to sellers in much of the country. It's also why we're experiencing the strongest price growth in more than seven years," he said.
Bond Markets Add To Overnight Gains Thanks to 800lb Grillo
Italy's Beppe Grillo doesn't weigh 800lbs, but he has been the metaphorical gorilla in the room this morning...
Overnight improvements in Treasuries were moderate at best, and came nowhere near challenging yesterday's mid-day low yields. 10's opened a bp lower in Asia and ratcheted another bp down by 6am despite well-subscribed Italian debt auctions and improving Euro-zone sentiment and business climate indexes.
Treasuries crossed into domestic hours just over 1.86 and MBS came in 2 ticks improved at 103-18. Both began rallying rather immediately and not for any reasons that will be readily apparent in the mainstream media.
German Bunds and Euros began losing steam at their quickest pace of the morning a solid 10 minutes before the Durable Goods release. This is due to comments from Beppe Grillo, who was the largest single party vote winner in Monday's election, saying that he won't support any new government. This effectively suggests Italy will have to go back to elections considering Berlusconi and Bersani are even less likely to end up working together.
Treasuries followed the Euro/Bunds move here. Equities futures actually paid it some mind as well, but drew some strength from positive internals in the Durable Goods report. The funny thing is that you'll probably see headlines elsewhere that suggest "weaker Durable Goods" helped bond markets. In fact, sans Grillo comments, Durables were net negative for bond markets, but weren't enough to trump the positive implications of more Italian uncertainty.
10's are currently down to 1.8465 and Fannie 3.0s are up 7 ticks at 103-22. S&P futures are right in line with 5pm levels. Bernanke and Pending Home Sales are up next at 10am. Again, these have been relegated to "put up or shut up" mode vs the 800lb Italian Gorilla in the room. It's not that the other data (or fed speeches) can't move markets, simply that they'd have to be extra shocking to do so meaningfully.
ECON: Durable Goods Weaker Than Expected
- Durables -5.2 vs -4.4 Consensus
- December revised down to +3.7 vs +4.3 previously
New orders for manufactured durable goods in January
decreased $11.8 billion or 5.2 percent to $217.0 billion,
the U.S. Census Bureau announced today. This
decrease, down following four consecutive monthly
increases, followed a 3.7 percent December increase.
Excluding transportation, new orders increased 1.9
percent. Excluding defense, new orders decreased 0.4
Transportation equipment, down three of the last four
months, drove the decrease, $14.7 billion or 19.8 percent
to $59.7 billion. This was led by defense aircraft and
parts, which decreased $5.1 billion.
Live Chat Featured Comments
Matthew Graham : "RTRS- FED'S BERNANKE - IF WE SEE NO PROGRESS ON UNEMPLOYMENT FOR AN EXTENDED PERIOD WE MIGHT RECONSIDER POLICY BUT WE ARE GETTING TRACTION "
Matthew Graham : "RTRS - FED'S BERNANKE - GETTING FISCAL HOUSE IN ORDER IS A LONG RUN ISSUE; SAYS IS SUPPORTIVE OF 'LESS FRONT LOADED' SET OF MEASURES "
Matthew Graham : "RTRS- FED'S BERNANKE - HIT TO GROWTH FROM FISCAL MEASURES THIS YEAR IS 'VERY SIGNIFICANT' "
Matthew Graham : "http://www.c-span.org/Events/Fed-Chairman-Appears-Before-House-Cmte-on-State-of-the-Economy/10737438367-1/"
Nate Miller : "concur with ya Matt, best it's been in a while. was finally able to re-lock some old VA deals been waiting for weeks to get pricing back...felt very good!"
Matthew Graham : "zoom out to a longer term time frame on advanced chart Nate. it's still pretty good..."
Nate Miller : "+7 ticks an hour ago was much better on the eyes"
Matthew Graham : "RTRS- U.S. JAN PENDING HOME SALES INDEX OF 105.9 HIGHEST SINCE APRIL 2010 (110.9)-NAR "
Matthew Graham : "RTRS- U.S. JAN PENDING HOME SALES INDEX +4.5 PCT (CONSENSUS +1.5 PCT) TO 105.9-REALTORS "
Matthew Graham : "RTRS - ITALY CENTRE-LEFT JUNIOR COALITION PARTNER REJECTS GOVERNMENT ALLIANCE WITH CENTRE-RIGHT "
Gus Floropoulos : "Jason here is the link: https://www.fanniemae.com/content/faq/project-review-summary-faqs.pdf"
Gus Floropoulos : "I get condo's approved through PERS Jason"
Matthew Graham : "RTRS - US JAN BUILDING PERMITS REVISED TO -0.6 PCT FROM +1.8 PCT, ANNUAL RATE TO 904,000 UNITS FROM 925,000 UNITS "
Jason Anker : "anyone here done a PERS with FNMA?"
Matthew Graham : "Bunds/Euros leading things lower, with an obligatory post-Durables blip. "
Matthew Graham : "Yep, durables not much of a mover right now considering Grillo just said he won't work with anyone in Italy"
Andrew Horowitz : "MG the non defense cap numbers related to Sandy? think about it the insurance checks were hitting in jan"
Matthew Graham : "yes, but this is only a decrease of 8 bln to 2 bln dollars in a total new orders figure of 216 billion"
Andrew Horowitz : "that number is noise DK"
Daniel Kramer : "defense aircraft/parts - 63.8pct????"
Matthew Graham : "RTRS- U.S. JAN DURABLES EX-TRANSPORTATION +1.9 PCT, BIGGEST RISE SINCE DEC 2011, (CONS +0.2 PCT) VS DEC +1.0 PCT (PREV +1.0 PCT) "
Matthew Graham : "RTRS - US JAN NONDEFENSE CAP ORDERS EX-AIRCRAFT +6.3 PCT, BIGGEST RISE SINCE DEC 2011, (CONS +0.2 PCT) VS DEC -0.3 PCT (PREV -0.3 PCT) "
Matthew Graham : "RTRS- US JAN DURABLES ORDERS -5.2 PCT (CONSENSUS -4.4 PCT) VS DEC +3.7 PCT (PREV +4.3 PCT) "